Vogt v. State Farm Life Insurance Co.

MICHAEL VOGT, on behalf of himself and all others similarly situated Plaintiff,v.STATE FARM LIFE INSURANCE COMPANY Defendant.

ORDER

NANETTE K. LAUGHREY United States District Judge

Plaintiff
Michael Vogt moves for reconsideration of the Court's
dismissal of his conversion claim (Count III), Doc. 52. [Doc.
56]. For the following reasons, Vogt's motion is granted,
and the Court's dismissal of his conversion claim is
vacated.

I.
Background

Plaintiff
Michael Vogt filed this class action for claims arising out
of his life insurance policy with Defendant State Farm Life
Insurance Company. Under this policy, State Farm maintains an
interest-bearing account in trust for the insured, and this
account's value, which is owned by the insured, grows
over time. The policy authorizes State Farm to take a monthly
deduction from this interest-bearing account, which is to be
calculated based on particular factors listed in the policy.
However, Vogt alleges that State Farm uses additional,
undisclosed factors in its rate calculations, resulting in
higher monthly charges than if State Farm relied only on the
factors listed in the policy. Vogt brought claims for
declaratory relief, conversion, and breach of contract based
on State Farm's alleged overcharges to his account.

On
February 3, 2017, the Court granted in part State Farm's
motion to dismiss with respect to Vogt's conversion
claim, concluding that it was barred by Missouri's
economic loss doctrine. [Doc. 56]. Vogt now moves this Court
under Rule 59(e) or 60(b) to reconsider this dismissal, which
he contends was a manifest error of law. Specifically, Vogt
argues that this Court overstated the reach of the economic
loss doctrine in Missouri, which he argues has never been
applied to a claim like his.

As
stated in the Court's original order, Vogt's claim
for conversion requires him to show that “(1) he owned
the property or was entitled to possess it; (2) the defendant
took possession of the property with the intent to exercise
some control over it; and (3) the defendant thereby deprived
the plaintiff of the right to possession.” Hunt v.
Estate of Hunt, 348 S.W.3d 103, 114 (Mo.Ct.App. 2011).
For his conversion claim, Vogt alleges that State Farm
deducted unauthorized amounts each month from his account;
that he placed money in his account in State Farm's
possession for a specific purpose to be applied consistently
with the terms of the policy; and that State Farm
misappropriated his money by diverting it for its own use
contrary to the policy.

A.
The Economic Loss Doctrine

In its
motion to dismiss, State Farm argued that Vogt's
conversion claim was barred by the economic loss doctrine,
which “bars recovery of purely pecuniary losses in tort
where the injury results from a breach of a contractual
duty.” Dubinsky v. Mermart, LLC, 595 F.3d 812,
819 (8th Cir. 2010). Vogt responded by contending that the
doctrine did not apply because he had a “possessory
right [to the converted funds], independent of [hi]s rights
under the contract.” [Doc. 22, p. 19 of 22]. After
assessing the parties' briefing on the economic loss
doctrine, the Court ultimately concluded that the doctrine
did bar Vogt's conversion claim because it “[wa]s
dependent on his breach of contract claim” and
“w[ould] rise or fall based on the Court's
interpretation of the policy contract.” [Doc. 52, p. 10
(Order on Motion to Dismiss)].

Now,
however, Vogt submits extensive briefing in support of
reconsideration, within which he cites nineteen additional
cases in support of the economic loss doctrine's
inapplicability, as well as provides the history and policy
rationales behind this doctrine in Missouri. Having
reconsidered its decision in light of these new authorities
and the parties' substantial briefing on the issue, the
Court is persuaded that Missouri's economic loss doctrine
does not apply to bar Vogt's conversion claim.

“Missouri's
economic loss doctrine grew out of claims of tort which were
alleged against builders of homes, or instances where a
plaintiff sought to hold a manufacturer or distributor of a
product liable in tort, as opposed to a contract action from
which a fiduciary duty arose.” Autry Morlan
Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332
S.W.3d 184, 194 (Mo.Ct.App. 2010). The doctrine was derived
from negligence and strict-liability cases and was created to
preserve the distinction between tort claims sounding in
warranty. See Crowder v. Vandendeale, 564 S.W.2d
879, 881 (Mo. banc 1978) (“[L]iability imposed for mere
deterioration or loss of bargain resulting from latent
structural defects is contractual.”); Autry Morlan
Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332
S.W.2d 184, 193 (Mo.Ct.App. 2010) (“[T]he common thread
running through these cases is the effort to impose tort
liability on the builder of a home, or to recover in tort for
the failure of a product which is alleged to be
defective”); see also Self v. Equilon Enterprises,
LLC, 2005 WL 3763533, at *8 (E.D. Mo. Mar. 30, 2005)
(“The doctrine was judicially created to protect the
integrity of the UCC bargaining process.”). The
Missouri Supreme Court adopted the doctrine to preserve the
distinction between tort and contract where a claim is based
on the “loss of [the] bargain.” See
Crowder, 564 S.W.2d at 882 (“[W]here mere
deterioration or loss of bargain is claimed, the concern is
with a failure to meet some standard of quality . . . [and]
[i]n the absence of some express agreement to the contrary,
the standard of quality will be presumed to be that of the
implied warranty term of reasonable fitness for use.”).

To be
sure, Missouri courts “have never recognized a mere
breach of contract as providing a basis for tort
liability.” Khulusi v. Sw. Bell Yellow Pages,
Inc.916 S.W.2d 227, 230 (Mo.Ct.App. 1995) (citing
American Mortg. Inv. Co. v. Hardin-Stockton Corp,
671 S.W.2d 283, 293 (Mo.Ct.App. 1984)). This is because
“[t]he act, not the breach gives rise to tort
liability.” Id. Therefore, if the act done
independently of the contract would result in a tort, and is
not dependent on the elements of the contract claim, a tort
claim may be asserted alongside a claim for breach of
contract. See Id. Accordingly, Missouri law is clear
that a single act can constitute both a breach of contract
and a tort without the tort being barred by the economic loss
doctrine. See, e.g., Autry, 332 S.W.3d at 193 (The
mere fact that “the complained of act or omission which
breaches a contract may also be a negligent act which would
give rise to a liability in tort” is no bar to
recovery).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this
case, Vogt&#39;s conversion claim arises from the independent
duty not to appropriate another&#39;s funds, a duty that
exists regardless of and independently of Vogt&#39;s life
insurance contract with State Farm. See, e.g., Cook v.
John Hancock Life Ins. Co., 2015 WL 178108 (W.D. Va. Jan
14, 2015) (finding Virginia&#39;s economic loss doctrine did
not bar plaintiff&#39;s conversion claim where
&ldquo;Virginia courts routinely have held that the duty not
to convert others&#39; property is a common law duty owed by
all, and would exist even in the absence of a contract
between the parties&rdquo;). In other words, State Farm&#39;s
taking of Vogt&#39;s money and the resulting deprivation of
Vogt&#39;s possessory right to his money would still result
in the tortious claim of conversion independently of the
parties&#39; contract. Therefore, the mere fact that State
Farm&#39;s alleged unauthorized deductions from Vogt&#39;s
account may constitute both a breach of that independent duty
and a breach of the contract does not preclude Vogt&#39;s
tort claim for conversion. See Davidson v. Hess, 673
S.W.2d 111, 112-13 (Mo.Ct.App. 1984) (“[T]he action may
be one in tort, even though the breach of duty may also be a
violation of the ...

Our website includes the first part of the main text of the court's opinion.
To read the entire case, you must purchase the decision for download. With purchase,
you also receive any available docket numbers, case citations or footnotes, dissents
and concurrences that accompany the decision.
Docket numbers and/or citations allow you to research a case further or to use a case in a
legal proceeding. Footnotes (if any) include details of the court's decision. If the document contains a simple affirmation or denial without discussion,
there may not be additional text.

Buy This Entire Record For
$7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.